Mandatory Retirement Policy

Are you a partner facing a mandatory retirement age policy? Many partnerships involving doctors, accountants, lawyers and other professional service providers have adopted mandatory retirement age policies. These policies raise the question whether forced retirement of “partners” is discrimination on the basis of age. The Age Discrimination in Employment Act (ADEA) prohibits discrimination on the basis of age by employers against employees who are over the age of 40. The ADEA, as it applies to employees, is generally clear in his prohibition of mandatory retirement policies. The problem then, is whether a “partner” is an “employee.”

Traditional notions of being a partner have changed. The involuntary or mandatory age-based retirement of “partners” has traditionally not been considered to be subject to the dictates of the ADEA because the ADEA is applicable to “employees” and partners are “owners” and “employers.” As such, mandatory retirement age policies among partnerships were considered to be outside the purview of the Equal Employment Opportunity Commission (EEOC)—the government agency charged with enforcing the ADEA—and the courts. However, the ADEA as it applies to partnerships in recent years continues to be refined: issues include whether one partner in a large partnership (some with 200 or more partners) really embodies ownership traits.

Even if you are titled a “partner”, you may still be considered an employee in the eyes of the ADEA. The central question is whether a “partner” is protected against a mandatory retirement age policy under the ADEA because that “partner” functions more like an employee than an owner or employer. To make this determination, the EEOC looks at the following six factors:

Whether the partnership can hire or fire the partner or set the rules and regulations of the partner’s work;

Whether and, if so, to what extent the partnership supervises the individual’s work;

Whether the individual reports to someone higher in the partnership;

Whether and, if so, to what extent the partner is able to influence the partnership;

Whether the parties intended that the partner be an employee, as expressed in written agreements or contracts; and

Whether the individual shares in the profits, losses and liabilities of the partnership.

The determination of whether a “partner” is an “employee” is made by balancing these factors. Further, these factors are not all inclusive and generally the determination comes down to the partner’s autonomy, the partner’s authority and the partner’s liability. In this regard, the less authority a partner has over the terms of his or her employment, the more likely that he or she is an employee protected by the ADEA. Likewise, the less authority a partner actually exercises, the less likely it is that the partner is excluded from the protections of the ADEA.

Other laws may also protect you against mandatory retirement age policies. In addition to the ADEA, there may also be state law considerations as well as compliance issues with ethical codes that govern the given profession. Ultimately, the determination of whether a “partner” is an “employee” protected under the ADEA, and other laws, is one made based on the specific facts and circumstances of the individual partner.

Blitman and King provides cutting edge, practical advice for clients in the Albany, Buffalo, Manhattan, Long Island, Rochester and Syracuse NY areas.